FOR ANNUAL REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 30, 2015

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-12906

(Exact name of registrant as specified in its charter)

Delaware

36-2096643

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

40W267 Keslinger Road, P.O. Box 393, LaFox, Illinois 60147-0393

(Address of principal executive offices)

Registrant’s telephone number, including area code: (630) 208-2200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common stock, $0.05 Par Value

Name of each exchange of which registered

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes ý No

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act ¨ Yes ý No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

¨

Accelerated Filer

ý

Non-Accelerated Filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of November 29, 2014, was approximately $116.2 million.

As of July 21, 2015, there were outstanding 11,530,283 shares of Common Stock, $0.05 par value and 2,140,644 shares of Class B Common Stock, $0.05 par value, which are convertible into Common Stock of the registrant on a one-for-one basis.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders scheduled to be held October 6, 2015, which will be filed pursuant to Regulation 14A, are incorporated by reference in Part III of this report. Except as specifically incorporated herein by reference, the abovementioned Proxy Statement is not deemed filed as part of this report.

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. The terms “may”, “should”, “could”, “anticipate”, “believe”, “continues”, “estimate”, “expect”, “intend”, “objective”, “plan”, “potential”, “project”, and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions, or beliefs and are subject to a number of factors, assumptions, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include the risk factors set forth in Item 1A of this Form 10-K. We undertake no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events, or otherwise.

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information, or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not our responsibility.

PART I

ITEM 1. Business

General

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.

During the first quarter of fiscal 2015, we created a new strategic business unit called Richardson Healthcare ("Healthcare"). As hospitals remain under pressure to reduce costs while serving a much larger customer base, there is a growing demand for independent sources of high-value replacement parts for diagnostic imaging. Having access to parts that are tested and in stock enables hospitals to terminate expensive service contracts with the Original Equipment Manufacturers ("OEM") and instead use third party service providers or in-house technicians. With our global infrastructure, technical sales team, and experience servicing the healthcare market, we are well positioned to take advantage of this market opportunity. Over time, our plan is to expand our position from being the leader in power grid tubes to a key player in the high-growth, high-profile healthcare industry.

Our fiscal year 2015 began on June 1, 2014, and ended on May 30, 2015. Unless otherwise noted, all references in this document to a particular year shall mean our fiscal year.

Geography

We currently have operations in the following major geographic regions:

Selected financial data attributable to each segment and geographic region for fiscal 2015, 2014, and 2013 is set forth in Note 10 “Segment and Geographic Information” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

We have three operating segments, which we define as follows:

Electron Device Group (Renamed Power and Microwave Technologies Group in July 2015)

EDG represents leading manufacturers of electron tubes and components used in semiconductor manufacturing equipment and industrial power applications. Among the suppliers they support are Amperex, CPI, Draloric, Eimac, General Electric, Hitachi, Jennings, L3, National, NJRC, Thales, Toshiba, and Vishay.

EDG's inventory levels reflect our commitment to maintain an inventory of a broad range of products for customers who are buying products for replacement of components used in critical equipment. On average, we hold 120 days of inventory in the normal course of operations. This level of inventory reflects the fact that EDG also sells a number of products representing trailing edge technology. While the market for these trailing edge technology products is declining, EDG is increasing its market share. EDG often buys products it knows it can sell ahead of any supplier price increases. As manufacturers for these products exit the business, EDG has the option to purchase a substantial portion of their remaining inventory.

EDG has distribution agreements with many of its suppliers; most of these agreements provide exclusive distribution rights which often include global responsibility. The agreements are typically long term, and usually contain provisions permitting termination by either party if there are significant breaches which are not cured within a reasonable period of time. Although some of these agreements allow EDG to return inventory periodically, others do not, in which case EDG may have obsolete inventory that they cannot return to the supplier.

EDG's suppliers provide warranty coverage for the products and allow return of defective products, including those returned to EDG by its customers. For information regarding the warranty reserves, see Note 3 “Significant Accounting Policies” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

In addition to third party products, we sell proprietary products principally under certain trade names we own including: Amperex®, Cetron®, and National®. Our proprietary products include thyratrons and rectifiers, power tubes, ignitrons, magnetrons, phototubes, microwave generators, and liquid crystal display monitors. The materials used in the manufacturing process consist of glass bulbs and tubing, nickel, stainless steel and other metals, plastic and metal bases, ceramics, and a wide variety of fabricated metal components. These materials are generally readily available, but some components may require long lead times for production, and some materials are subject to shortages or price fluctuations based on supply and demand.

Canvys

Canvys provides customized display solutions to medical, industrial, and original equipment manufacturers. Our engineers design, manufacture, source, and support a full spectrum of solutions to match the needs of our customers. We offer custom display solutions that include touch screens, protective panels, custom enclosures, specialized cabinet finishes, and application specific software packages. Our volume commitments are much lower than those of the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality liquid crystal displays, mounting devices, and customized computing platforms.

We have long-standing relationships with key component and finished goods manufacturers including 3M, LG, NEC Displays, and several key Asian display manufacturers that manufacture products to our specifications. We believe supplier relationships, combined with our engineering design and manufacturing capabilities and private label partnerships, allow us to maintain a well-balanced and technologically advanced offering of customer specific display solutions.

Healthcare, included in Canvys prior to fiscal year 2015, manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems ("PACS"); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

Sales and Product Management

As of the end of fiscal 2015, we employed 155 sales and product management personnel worldwide. In addition, we have authorized representatives, who are not our employees, selling our products primarily in regions where we do not have a direct sales presence.

We offer various credit terms to qualifying customers as well as cash in advance and credit card terms. We establish credit limits for each customer and routinely review delinquent and aging accounts.

Distribution

We maintain approximately 110,700 part numbers in our product inventory database and we estimate that more than 90% of orders received by 6:00 p.m. local time are shipped complete the same day if product is in stock. Customers can access our products on our web sites, www.rell.com, www.rellhealthcare.com, www.canvys.com, and www.rellaser.com, through electronic data interchange, or by telephone. Customer orders are processed by our regional sales offices and supported primarily by one of our distribution facilities in LaFox, Illinois; Amsterdam, Netherlands; Marlborough, Massachusetts; Plymouth, Minnesota; Donaueschingen, Germany; or Singapore, Singapore. We also have satellite warehouses in Sao Paulo, Brazil; Shanghai, China; Bangkok, Thailand; and Hook, United Kingdom. Our data processing network provides on-line, real-time interconnection of all sales offices and central distribution operations, 24 hours per day, seven days per week. Information on stock availability, pricing in local currency, cross-reference information, customers, and market analyses are obtainable throughout the entire distribution network.

International Sales

During fiscal 2015, approximately 56% of our sales were made outside the U.S. We continue to pursue new international sales to further expand our geographic reach.

Employees

As of May 30, 2015, we employed 338 full-time individuals. Of these, 220 were located in the United States and 118 were located internationally. The worldwide employee base included 155 in sales and product management and an additional 183 employees in distribution support, administrative positions, and value-add and manufacturing. All of our employees are non-union, and we consider our relationships with our employees to be good.

Website Access to SEC Reports

We maintain an Internet website at www.rell.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically with the Securities and Exchange Commission. Interactive Data Files pursuant to Rule 405 of Regulation S-T, of these filing dates, formatted in Extensible Business Reporting Language (“XBRL”) are accessible as well. To access these reports, go to our website at www.rell.com. The foregoing information regarding our website is provided for convenience and the content of our website is not deemed to be incorporated by reference in this report filed with the Securities and Exchange Commission.

Investors should consider carefully the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate. While we believe we have identified the key risk factors affecting our businesses, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our results of operations.

We may not achieve our plan for sales growth and margin targets.

We have established both margin and expense targets to grow our sales with new and existing customers. If we do not achieve our growth objectives, the complexity of our global infrastructure makes it difficult to leverage our fixed cost structure to align with the size of our operations. Factors that could have a significant effect on our ability to achieve these goals include the following:

•

Failure to achieve our sales and margin growth objectives in our product lines and business units;

We have historically incurred significant charges for inventory obsolescence, and may incur similar charges in the future.

We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery that is powered by tube technology. As technology evolves and this capital equipment is replaced, the market for our products potentially declines. In addition, the market for many of our other products is characterized by rapid change resulting from the development of new technologies, evolving industry standards, frequent new product introductions by some of our suppliers and changing end-user demand, which can contribute to the decline in value or obsolescence of our inventory. We do not have many long-term supply contracts with our customers. If we fail to anticipate the changing needs of our customers or we fail to accurately forecast customer demand, our customers may not place orders with us, and we may accumulate significant inventories of products which we may be unable to sell or return to our vendors. This may result in a decline in the value of our inventory.

We face competitive pressures that could have a material adverse effect on our business.

Our overall competitive position depends on a number of factors including price, engineering capability, vendor representation, product diversity, lead times and the level of customer service. There are very few vacuum tube competitors in the markets we serve. There are also a limited number of Chinese manufacturers whose ability to produce vacuum tubes has progressed over the past several years. The most significant competitive risk comes from technical obsolescence. Canvys faces many competitors in the markets we serve. Increased competition may result in price reductions, reduced margins, or a loss of market share, any of which could materially and adversely affect our business, operating results, and financial condition. As we expand our business and pursue our growth initiatives, we may encounter increased competition from current and/or new competitors. Our failure to maintain and enhance our competitive position could have a material adverse effect on our business.

A single stockholder has voting control over us.

As of July 22, 2015, Edward J. Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 99% of the outstanding shares of our Class B common stock, representing approximately 65% of the voting power of the outstanding common stock. This share ownership permits Mr. Richardson to exert control over the outcome of stockholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests, and other significant corporate transactions.

We are dependent on a limited number of vendors to supply us with essential products.

Our principal products are capacitors, vacuum tubes and related products, microwave generators, and high voltage power supplies. The products we supply are currently produced by a relatively small number of manufacturers. One of our suppliers represents 17% of our total sales volume. Our success depends, in large part, on maintaining current vendor relationships and developing new relationships. To the extent that our significant suppliers are unwilling or unable to continue to do business with us, or extend lead times, or limit supplies due to capacity constraints, or other factors, there could be a material adverse effect on our business.

International operations represent a significant percentage of our business and present a variety of risks which could impact our results.

Because we source and sell our products worldwide, our business is subject to risks associated with doing business internationally. These risks include the costs and difficulties of managing foreign entities, limitations on the repatriation and investment of funds, cultural differences that affect customer preferences and business practices, unstable political or economic conditions, trade protection measures and import or export licensing requirements, and changes in tax laws.

We also face exposure to fluctuations in foreign currency exchange rates because we conduct business outside of the United States. Price increases caused by currency exchange rate fluctuations may make our products less competitive or may have an adverse effect on our margins. Our international revenues and expenses generally are derived from sales and operations in currencies other than the U.S. dollar. Accordingly, when the U.S. dollar strengthens in relation to the base currencies of the countries in which we sell our products, our U.S. dollar reported net revenue and income will decrease. We currently do not engage in any currency hedging transactions. We cannot predict whether foreign currency exchange risks inherent in doing business in foreign countries will have a material adverse effect on our operations and financial results in the future.

We rely on our information systems to process, analyze, and manage data to facilitate the purchase, manufacture, and distribution of our products, as well as to receive, process, bill, and ship orders on a timely basis. A significant disruption or failure in the design, implementation or support of our new information technology systems could significantly disrupt our business, result in increased costs or decreased revenues, harm our reputation, or expose us to liability.

Our products may be found to be defective or our services performed may result in equipment or product damage and, as a result, warranty and/or product liability claims may be asserted against us.

Many of our components are sold at prices that are significantly lower than the cost of the equipment or other goods in which they are incorporated. Since a defect or failure in a product could give rise to failures in the equipment that incorporates them, we may face claims for damages that are disproportionate to the revenues and profits we receive from the components involved in the claims. While we typically have provisions in our agreements with our suppliers that hold the supplier accountable for defective products, and we and our suppliers generally exclude consequential damages in our standard terms and conditions, our ability to avoid such liabilities may be limited as a result of various factors, including the inability to exclude such damages due to the laws of some of the countries where we do business. Our business could be adversely affected as a result of a significant quality or performance issues in the components sold by us if we are required to pay for the damages. Although we have product liability insurance, such insurance is limited in coverage and amount.

Substantial defaults by our customers on our accounts receivable or the loss of significant customers could have a significant negative impact on our business.

We extend credit to our customers. The failure of a significant customer or a significant group of customers to timely pay all amounts due could have a material adverse effect on our financial condition and results of operations. The extension of credit involves considerable judgment and is based on management’s evaluation of factors which include such things as a customer’s financial condition, payment history, and the availability of collateral to secure customers’ receivables.

We may not be successful in identifying, consummating and integrating future acquisitions.

As part of our growth strategy, our intent is to acquire additional businesses or assets. We may not be able to identify attractive acquisition candidates or complete the acquisition of identified candidates at favorable prices and upon advantageous terms. Also, acquisitions are accompanied by risks, such as potential exposure to unknown liabilities and the possible loss of key employees and customers of the acquired business. In addition, we may not obtain the expected benefits or cost savings from acquisitions. Acquisitions are subject to risks associated with financing the acquisition, and integrating the operations, personnel and systems of the acquired businesses. If any of these risks materialize, they may result in disruptions to our

Our revenues and gross profit margins depend significantly on global economic conditions, the demand for our products and services and the financial condition of our customers. Economic weakness and uncertainty have in the past resulted, and may result in the future, in decreased revenues and gross profit margins. Economic weakness and uncertainty also make it more difficult for us to forecast overall supply and demand with a great deal of confidence.

Our operating results during fiscal 2015 reflect a decline in sales volume, and there can be no assurance that we will experience a recovery in the near future; nor can there be any assurance that such worldwide economic volatility experienced recently will not continue.

Major disruptions to our logistics capability could have a material adverse impact on our operations.

Our global logistics services are operated through specialized and centralized distribution centers. We depend on third party transportation service providers for the delivery of products to our customers. A major interruption or disruption in service at any of our distribution centers for any reason (such as natural disasters, pandemics, or significant disruptions of services from our third party providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have a severe impact on our business, operations and financial performance.

We may be subject to intellectual property rights claims, which are costly to defend, could require payment of damages or licensing fees, and/or could limit our ability to use certain technologies in the future.

Substantial litigation and threats of litigation regarding intellectual property rights exist in the display systems and electronics industries. From time to time, third parties, including certain companies in the business of acquiring patents with the intention of aggressively seeking licensing revenue from purported infringers, may assert patent and/or other intellectual property rights to technologies that are important to our business. In any dispute involving products that we have sold, our customers could also become the target of litigation. We are obligated in many instances to indemnify and defend our customers if the products we sell are alleged to infringe any third party’s intellectual property rights. In some cases, depending on the nature of the claim, we may be able to seek indemnification from our suppliers for our self and our customers against such claims, but there is no assurance that we will be successful in obtaining such indemnification or that we are fully protected against such claims. Any infringement claim brought against us, regardless of the duration, outcome or size of damage award, could result in substantial cost, divert our management’s attention, be time consuming to defend, result in significant damage awards, cause product shipment delays, or require us to enter into royalty or other licensing agreements.

Additionally, if an infringement claim is successful we may be required to pay damages or seek royalty or license arrangements which may not be available on commercially reasonable terms. The payment of any such damages or royalties may significantly increase our operating expenses and harm our operating results and financial condition. Also, royalty or license arrangements may not be available at all. We may have to stop selling certain products or certain technologies, which could affect our ability to compete effectively.

Potential lawsuits, with or without merit, may divert management’s attention, and we may incur significant expenses in our defense. In addition, we may be required to pay damage awards or settlements, become subject to injunctions or other equitable remedies, or determine to abandon certain lines of business, that may cause a material adverse effect on our results of operations, financial position, and cash flows.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to detect fraud or report our financial results accurately or timely.

An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We are required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting. Based on these evaluations, we may conclude that enhancements, modifications, or changes to internal controls are necessary or desirable. While management evaluates the effectiveness of our internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including fraud, collusion, management override, and failure in human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks.

If we fail to maintain an effective system of internal controls, or if management or our independent registered public accounting firm discovers material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent fraud. In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the Securities

and Exchange Commission or NASDAQ. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we are deemed to be an investment company, we will be required to meet burdensome compliance requirements and restrictions on our activities.

We currently have significant cash and investments. If we are deemed to be an “investment company” as defined under the Investment Company Act of 1940 (the “Investment Company Act”), the nature of our investments may be subject to various restrictions. We do not believe that our principal activities subject us to the Investment Company Act. If we are deemed to be subject to the Investment Company Act, compliance with required additional regulatory burdens would increase our operating expenses.

The company's goodwill and identifiable intangible assets could become impaired, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs.

Our goodwill and intangible assets could become impaired, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs. We ascribe value to certain intangible assets, which consist of customer lists and trade names resulting from acquisitions. We may incur an impairment charge on goodwill or on intangible assets if we determine that the fair value of the intangible assets are less than their current carrying values. We evaluate whether events have occurred that indicate all, or a portion, of the carrying amount of goodwill or intangible assets may no longer be recoverable. If this is the case, an impairment charge to earnings would be necessary.

The Company owns three facilities and leases 30 facilities. We own our corporate facility and largest distribution center, which is located on approximately 100 acres in LaFox, Illinois and consists of approximately 242,000 square feet of manufacturing, warehouse, and office space. We maintain geographically diverse facilities because we believe this provides value to our customers and suppliers, and limits market risk and exchange rate exposure. We consider our properties to be well maintained, in sound condition, and adequate for our present needs. The extent of utilization varies from property to property and from time to time during the year.

Our facility locations, their primary use, and segments served are as follows:

From time to time, we or our subsidiaries are involved in pending judicial proceedings concerning matters arising in the ordinary course of our business. While the outcome of litigation is subject to uncertainties, based on information at the time the financial statements were issued, we do not believe that the outcome of any current claims will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Our quarterly dividend was $0.06 per common share and $0.054 per Class B common share. Annual dividend payments for both fiscal years 2015 and 2014 were approximately $3.3 million per year. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions, and such other factors that the Board may deem relevant.

Common Stock Information

Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol (“RELL”). There is no established public trading market for our Class B common stock. As of July 21, 2015, there were approximately 595 stockholders of record for the common stock and approximately 16 stockholders of record for the Class B common stock. The following table sets forth the high and low closing sales price per share of RELL common stock as reported on the NASDAQ for the periods indicated.

The following graph compares the performance of our common stock for the periods indicated with the performance of the NASDAQ Composite Index and NASDAQ Electronic Components Index. The graph assumes $100 invested on the last day of our fiscal year 2010, in our common stock, the NASDAQ Composite Index, and NASDAQ Electronic Components Index. Total return indices reflect reinvestment of dividends at the closing stock prices at the date of the dividend declaration.

This information should be read in conjunction with our consolidated financial statements, accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein.

Fiscal Year Ended (1)

(in thousands , except per share amounts )

May 30, 2015

May 31, 2014

June 1, 2013 (2)

June 2, 2012(2)

May 28, 2011 (2)

Statements of Income (Loss)

Net sales

$

136,957

$

137,960

$

141,066

$

157,836

$

158,867

Continuing Operations

Income (loss) from continuing operations before tax

(6,994

)

(652

)

642

$

7,656

$

2,450

Income tax provision (benefit)

(1,466

)

(307

)

160

(334

)

468

Income (loss) from continuing operations

$

(5,528

)

$

(345

)

$

482

$

7,990

$

1,982

Discontinued Operations

Income (loss) from discontinued operations

(31

)

(170

)

766

$

536

$

85,966

Net income (loss)

$

(5,559

)

$

(515

)

$

1,248

$

8,526

$

87,948

Per Share Data

Net income (loss) per Common share - Basic:

Income (loss) from continuing operations

$

(0.41

)

$

(0.03

)

$

0.03

$

0.48

$

0.11

Income (loss) from discontinued operations

—

(0.01

)

0.05

0.03

4.87

Total net income (loss) per Common share - Basic:

$

(0.41

)

$

(0.04

)

$

0.08

$

0.51

$

4.98

Net income (loss) per Class B common share - Basic:

Income (loss) from continuing operations

$

(0.36

)

$

(0.02

)

$

0.03

$

0.43

$

0.10

Income (loss) from discontinued operations

—

(0.01

)

0.05

0.03

4.38

Total net income (loss) per Class B common share - Basic:

$

(0.36

)

$

(0.03

)

$

0.08

$

0.46

$

4.48

Net income (loss) per Common share - Diluted:

Income (loss) from continuing operations

$

(0.41

)

$

(0.03

)

$

0.03

$

0.47

$

0.11

Income (loss) from discontinued operations

—

(0.01

)

0.05

0.03

4.72

Total net income (loss) per Common share - Diluted:

$

(0.41

)

$

(0.04

)

$

0.08

$

0.50

$

4.83

Net income (loss) per Class B common share - Diluted:

Income (loss) from continuing operations

$

(0.36

)

$

(0.02

)

$

0.03

$

0.43

$

0.10

Income (loss) from discontinued operations

—

(0.01

)

0.05

0.03

4.32

Total net income (loss) per Class B common share - Diluted:

$

(0.36

)

$

(0.03

)

$

0.08

$

0.46

$

4.42

Cash Dividend Data

Dividends per common share

$

0.240

$

0.240

$

0.240

$

0.200

$

0.110

Dividends per Class B common share (3)

$

0.220

$

0.220

$

0.220

$

0.180

$

0.099

Balance Sheet Data

Total assets

$

184,994

$

203,545

$

217,318

$

231,423

$

314,054

Stockholders’ equity

$

156,652

$

174,845

$

185,239

$

200,213

$

222,047

(1)

Our fiscal year ends on the Saturday nearest the end of May. Each of the fiscal years presented contain 52/53 weeks.

(2)

Restated to reflect the sale of RFPD. See Note 4 “Discontinued Operations” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

(3)

The dividend per Class B common share is 90% of the dividend per Class A common share.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and related notes.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist the reader in better understanding our business, results of operations, financial condition, changes in financial condition, critical accounting policies and estimates, and significant developments. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes appearing elsewhere in this filing. This section is organized as follows:

•

Business Overview

•

Results of Continuing Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 30, 2015, May 31, 2014, and June 1, 2013, as reflected in our consolidated statements of comprehensive income (loss).

•

Liquidity, Financial Position, and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 30, 2015, May 31, 2014, and June 1, 2013, and a discussion of changes in our financial position.

Business Overview

Richardson Electronics, Ltd. is a leading global provider of engineered solutions, power grid and microwave tubes and related consumables; power conversion and RF and microwave components; high value displays, flat panel detector solutions and replacement parts for diagnostic imaging equipment; and customized display solutions. We serve customers in the alternative energy, healthcare, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. The Company’s strategy is to provide specialized technical expertise and “engineered solutions” based on our core engineering and manufacturing capabilities. The Company provides solutions and adds value through design-in support, systems integration, prototype design and manufacturing, testing, logistics, and aftermarket technical service and repair through its global infrastructure.

Our products include electron tubes and related components, microwave generators, subsystems used in semiconductor manufacturing, and visual technology solutions. These products are used to control, switch or amplify electrical power signals, or are used as display devices in a variety of industrial, commercial, medical, and communication applications.

During the first quarter of fiscal 2015, we created a new strategic business unit called Richardson Healthcare ("Healthcare"). As hospitals remain under pressure to reduce costs while serving a much larger customer base, there is a growing demand for independent sources of high-value replacement parts for diagnostic imaging. Having access to parts that are tested and in stock enables hospitals to terminate expensive service contracts with the Original Equipment Manufacturers ("OEM") and instead use third party service providers or in-house technicians. With our global infrastructure, technical sales team, and experience servicing the healthcare market, we are well positioned to take advantage of this market opportunity. Over time, our plan is to expand our position from being the leader in power grid tubes to a key player in the high-growth, high-profile healthcare industry.

Healthcare manufactures, distributes and services high value replacement parts for the healthcare market including hospitals, medical centers, independent service organizations, and multi-vendor service providers. Products include power grid tubes, hydrogen thyratrons, klystrons, magnetrons; Image Systems medical displays and workstations for picture archiving and communication systems ("PACS"); visual solutions for operating rooms/surgical environments; digital radiography solutions including replacement flat panel detectors and upgrades; and additional replacement components currently under development for the diagnostic imaging service market. Through a combination of newly developed products and partnerships, service

offerings, and training programs, we believe we can help our customers improve efficiency and deliver better clinical outcomes while lowering the cost of healthcare delivery.

We currently have operations in the following major geographic regions:

•

North America;

•

Asia/Pacific;

•

Europe; and

•

Latin America.

Results of Continuing Operations

Overview - Fiscal Year Ended May 30, 2015

•

Net sales for fiscal 2015 were $137.0 million, down 0.7%, compared to net sales of $138.0 during fiscal 2014.

•

Gross margin was 30.0% of net sales for fiscal year 2015, compared to 29.7% of net sales for fiscal 2014.

•

Selling, general, and administrative expenses increased to $49.2 million, or 35.9% of net sales, for fiscal 2015, compared to $43.5 million, or 31.5% of net sales, for fiscal 2014.

•

Operating loss during fiscal 2015 was $8.1 million, compared to $4.2 million for fiscal 2014.

•

Other income for fiscal 2015 was $1.1 million, compared to other income of $3.5 million for fiscal 2014. Other income for fiscal 2014 included $2.5 million of proceeds from a class action lawsuit settlement.

•

Loss from continuing operations during fiscal 2015 was $5.5 million versus a loss of $0.3 million during fiscal 2014.

•

Loss from discontinued operations, net of tax, was less than $0.1 million during fiscal 2015, compared to loss from discontinued operations, net of tax, of $0.2 million during fiscal 2014.

•

Net loss during fiscal 2015 was $5.6 million, compared to net loss of $0.5 million during fiscal 2014.

Net Sales and Gross Profit Analysis

Net sales by segment and percent change for fiscal 2015, 2014, and 2013 were as follows (in thousands):

Consolidated gross profit was $41.1 million during fiscal 2015, compared to $41.0 million during fiscal 2014. Consolidated gross margin as a percentage of net sales increased slightly to 30.0% during fiscal 2015, from 29.7% during fiscal 2014. Gross margin during fiscal 2015 included expense related to inventory provisions for EDG of $0.1 million, $0.1 million for Canvys, and less than $0.1 million for Healthcare. Gross margin during fiscal 2014 included expense related to inventory provisions for EDG of $0.6 million and $0.2 million for Canvys.

Consolidated gross profit was $41.0 million during fiscal 2014, compared to $41.5 million during fiscal 2013. Consolidated gross margin as a percentage of net sales increased slightly to 29.7% during fiscal 2014, from 29.5% during fiscal 2013. Gross margin during fiscal 2014 and fiscal 2013 included expense related to inventory provisions for EDG and Canvys of $0.6 million and $0.2 million, respectively. In addition, gross margin for EDG included included $0.5 million of unabsorbed manufacturing labor and overhead expenses for fiscal year 2014. Gross margin for EDG during fiscal year 2013 included $0.8 million of unabsorbed manufacturing costs.

Electron Device Group (Renamed Power and Microwave Technologies Group in July 2015)

Net sales for EDG increased 2.4% to $105.7 million during fiscal 2015, from $103.3 million during fiscal 2014. Net sales of engineered solutions including continuous wave magnetrons and related assemblies sold primarily into the semiconductor wafer fabrication market as well as microwave generators increased. Net sales of tubes also increased in the laser, aviation, and marine markets, offset by declines primarily in the industrial and broadcast markets. Gross margin as a percentage of sales increased to 31.3% during fiscal 2015 compared to 30.6% during fiscal 2014 primarily due to shifts in product and geographic mix.

Net sales for EDG slightly increased 0.7% to $103.3 million during fiscal 2014, from $102.6 million during fiscal 2013. Net sales of tubes grew in the industrial heating , marine, and laser markets but were offset by declines primarily in the broadcast and aviation markets. Gross margin as a percentage of net sales remained flat at 30.6% during fiscal 2014 compared to fiscal 2013.

Canvys

Net sales for Canvys decreased 11.5% to $24.6 million during fiscal 2015, from $27.9 million during fiscal 2014. Sales in the North America and European OEM markets were down due to delays in new programs which impacted our ability to recover from the loss of several customers that concluded programs. Gross margin as a percentage of net sales declined to 26.2% during fiscal 2015 as compared to 27.2% during fiscal 2014, due to devaluation of the euro and increased engineering and freight costs.

Net sales for Canvys decreased 13.3% to $27.9 million during fiscal 2014, from $32.1 million during fiscal 2013. Sales were up slightly in Europe OEM and down in the North America OEM market where certain display vendors took business direct. Gross margin as a percentage of net sales increased to 27.2% during fiscal 2014 as compared to 25.3% during fiscal 2013, due to continued margin improvement in Europe and lower inbound freight costs associated with inventory management.

Healthcare

Net Sales for Healthcare (previously part of our Canvys business) decreased 3.9% to $6.6 million during fiscal 2015, from $6.8 million during fiscal 2014. Sales were down in the Picture Archiving and Communication Systems (PACS) display market driven by budget concerns and a difficult capital market for hospitals. Gross margin as a percentage of net sales decreased to 24.1% during fiscal year 2015, compared to 26.6% during fiscal year 2014 due to competitive pricing pressure and shifts in product mix.

Net sales for Healthcare increased 7.8% to $6.8 million during fiscal 2014, from $6.3 million during fiscal 2013. Gross margin as a percentage of net sales decreased to 26.6% during fiscal 2014 as compared to 31.1% during fiscal 2013.

Sales by Geographic Area

On a geographic basis, our sales are categorized by destination: North America; Europe; Asia/Pacific; Latin America; and Other.

Net sales by geographic area and percent change for fiscal 2015, 2014, and 2013 were as follows (in thousands):

Net Sales

FY 2015

FY 2014

FY 2013

FY15 vs. FY14

% Change

FY14 vs. FY13

% Change

North America

$

59,742

$

57,137

$

62,269

4.6

%

(8.2

%)

Asia/Pacific

24,605

24,069

22,732

2.2

%

5.9

%

Europe

44,425

47,610

45,663

(6.7

%)

4.3

%

Latin America

8,275

8,936

9,447

(7.4

%)

(5.4

%)

Other (1)

(90

)

208

955

(143.3

%)

(78.2

%)

Total

$

136,957

$

137,960

$

141,066

(0.7

%)

(2.2

%)

Gross profit by geographic area and percent of geographic net sales for fiscal 2015, 2014, and 2013 were as follows (in thousands):

Gross Profit (Loss)

FY 2015

FY 2014

FY 2013

North America

$

20,352

34.1

%

$

18,905

33.1

%

$

20,963

33.7

%

Asia/Pacific

7,967

32.4

%

7,849

32.6

%

7,805

34.3

%

Europe

14,051

31.6

%

15,506

32.6

%

14,248

31.2

%

Latin America

3,082

37.2

%

3,231

36.2

%

3,296

34.9

%

Other (1)

(4,314

)

(4,477

)

(4,767

)

Total

$

41,138

30.0

%

$

41,014

29.7

%

$

41,545

29.5

%

(1) Other primarily includes net sales not allocated to a specific geographical region, unabsorbed value-add costs, and unallocated freight expenses.

We sell our products to customers in diversified industries and perform periodic credit evaluations of our customers’ financial condition. Terms are generally on open account, payable net 30 days in North America, and vary throughout Asia/Pacific, Europe, and Latin America. Estimates of credit losses are recorded in the financial statements based on monthly reviews of outstanding accounts.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased during fiscal 2015 to $49.2 million from $43.5 million during fiscal 2014. SG&A as a percentage of sales from continuing operations, increased to 35.9% during fiscal 2015 from 31.5% during fiscal 2014. The increase in SG&A costs of $5.7 million during fiscal 2015, compared to fiscal 2014, includes $3.9 million of expenses related to our new IT system implementation and $2.4 million related to our engineered solutions and healthcare growth initiatives, partially offset by other decreases in our administrative expenses of $0.6 million.

Selling, general, and administrative expenses (“SG&A”) increased during fiscal 2014 to $43.5 million from $41.5 million during fiscal 2013. SG&A as a percentage of sales from continuing operations, increased to 31.5% during fiscal 2014 from 29.4% during fiscal 2013. The increase in SG&A costs of $2.0 million during fiscal 2014, compared to fiscal 2013, includes severance costs of $1.2 million, new system implementation expenses of $0.8 million, expenses related to evaluating potential acquisitions of $1.1 million, and new product development costs of $0.4 million, partially offset by a $1.5 million decrease within EDG, Canvys, and support functions.

Impairment of Goodwill

The Company has not had any goodwill on its balance sheet since March 1, 2014. The results of our goodwill impairment tests as of March 1, 2014, indicated that the balance of goodwill reported, entirely attributed to our EDG reporting unit, was fully impaired. The goodwill impairment test revealed that there was no implied goodwill value as of the measurement date. As a result, we recorded a pre-tax goodwill impairment charge of $1.7 million during fiscal year 2014. Additionally, a $0.4 million tax benefit was recorded related to the goodwill impairment.

Other Income/Expense

Other income/expense was income of $1.1 million during fiscal 2015, compared to income of $3.5 million during fiscal 2014. Fiscal 2015 includes $1.0 million of investment income. Fiscal 2014 included an antitrust class action lawsuit settlement of $2.5 million and $1.0 million of investment income. The $0.6 million of income in fiscal 2013 included

investment income of $1.3 million, partially offset by a foreign exchange loss of $0.8 million. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Income Tax Provision (Benefit)

Our income tax benefit from continuing operations during fiscal year 2015 and fiscal year 2014 was $1.5 million and $0.3 million, respectively. Our income tax provision for fiscal year 2013 was $0.2 million. The effective income tax rates for continuing operations during fiscal 2015, 2014, and 2013, were (20.9)%, (47.0)%, and 24.9%, respectively. The difference between the effective tax rates as compared to the U.S. federal statutory rate of 34% during 2015, 2014, and 2013 resulted from our geographical distribution of taxable income or losses, return to provision adjustments, the release of income tax reserves for uncertain tax positions, changes in the amount of foreign earnings considered to be permanently reinvested, and changes in valuation allowance.

As of May 30, 2015, we had approximately $3.0 million of federal net operating loss (“NOL”) carryforwards.

Domestic state NOL carryforwards amounted to approximately $2.4 million. Foreign NOL carryforwards totaled approximately $0.6 million with various or indefinite expiration dates. We also have $0.3 million of foreign tax credit carryforwards as of May 30, 2015. We do not have any alternative minimum tax credit carryforward as of May 30, 2015.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. Accordingly, we have provided a deferred tax liability totaling $4.8 million and $7.0 million as of May 30, 2015 and May 31, 2014, respectively, on foreign earnings of $37.2 million and $41.3 million, respectively. In addition, as of May 30, 2015, $33.7 million of cumulative positive earnings of some of our foreign subsidiaries are still considered permanently reinvested pursuant to ASC 740-30, Income Taxes - Other Considerations or Special Areas (“ASC 740-30”). Due to various tax attributes that are continuously changing, it is not practicable to determine what, if any, tax liability might exist if such earnings were to be repatriated.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended May 30, 2015. Such objective evidence limits the ability to consider subjective evidence such as future income projections. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the repatriation of foreign earnings which we do not consider permanently reinvested in certain of our foreign subsidiaries. The weight of this positive evidence is not sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. jurisdiction.

On the basis of this evaluation, as of May 30, 2015, a valuation allowance of $5.2 million has been established to record only the portion of the deferred tax asset that will more likely than not be realized. The valuation allowance relates to deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred. We also recorded a valuation allowance for all domestic federal and state net deferred tax assets considering the significant cumulative losses in the U.S. jurisdiction, the reversal of the deferred tax liability for foreign earnings, and no forecast of additional U.S. income. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

Income taxes paid, including foreign estimated tax payments, were $0.5 million, $2.1 million, and $1.7 million during fiscal 2015, 2014, and 2013, respectively.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2005 are closed for examination under the statute of limitation for U.S. federal, state or local, or non-U.S. tax jurisdictions. We are also currently under examination in Germany (fiscal 2008, 2009, 2010, and 2011). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2008 and the Netherlands beginning in fiscal 2009.

The uncertain tax positions as of May 30, 2015 and May 31, 2014, totaled $2.0 million and $0.2 million, respectively. Unrecognized tax benefits of $0.1 million would affect our effective tax rate if recognized.

During fiscal year 2011, we completed the sale of the assets primarily used or held for use in, and certain liabilities of our RF, Wireless, and Power Division ("RFPD"), as well as certain other Company assets, including our information technology assets, to Arrow Electronics, Inc. ("Arrow") in exchange for $238.8 million ("the Transaction"). In accordance with Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20"), we reported the financial results of RFPD as a discontinued operation. Refer to Note 4 "Discontinued Operations" of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Financial Summary - Discontinued Operations

Summary financial results for fiscal 2015, 2014, and 2013 are presented in the following table (in thousands):

Fiscal 2015

Fiscal 2014

Fiscal 2013

Net sales

$

—

$

402

$

636

Gross loss (1)

—

(330

)

(553

)

Selling, general, and administrative expenses (2)

—

215

714

Additional (gain)/loss on sale

—

—

18

Income tax provision (benefit) (3)

31

(375

)

(2,051

)

Income (loss) from discontinued operations, net of tax

(31

)

(170

)

766

Notes:

(1)

Gross loss for fiscal years 2014 and 2013 includes unabsorbed manufacturing labor and overhead expenses related to the Manufacturing Agreement with RFPD which ended March 1, 2014.

(2)

Selling, General and Administrative expenses in fiscal years 2014 and 2013 related primarily to professional fees for tax audits resulting from the Transaction.

(3)

The income tax provision for fiscal year 2015 was the result of an income tax audit as a result of the Transaction. The income tax benefits in fiscal years 2014 and 2013 relates to the reversal of tax reserves.

Assets and liabilities classified as discontinued operations on our consolidated balance sheets as of May 30, 2015, and May 31, 2014, include the following (in thousands):

May 30, 2015

May 31, 2014

Inventories

$

—

$

18

Discontinued operations - Assets

$

—

$

18

Accrued liabilities - current

$

—

$

7

Accrued liabilities - non-current

—

130

Discontinued operations - Liabilities

$

—

$

137

Liquidity, Financial Position, and Capital Resources

Our growth and cash needs have been primarily financed through income from operations and the proceeds from the sale of RFPD during fiscal 2011.

Cash and cash equivalents were $74.5 million at May 30, 2015. In addition, CD’s and time deposits, classified as short-term investments were $23.7 million and long-term investments were $11.5 million including equity securities of $0.6 million. Cash and investments at May 30, 2015, consisted of $51.1 million in North America, $16.6 million in Europe, $0.7 million in Latin America, and $41.3 million in Asia/Pacific.

Cash and cash equivalents were $102.8 million at May 31, 2014. In addition, CD’s and time deposits classified as short-term investments were $31.7 million and long-term investments were $1.5 million, including equity securities of $0.5 million. Cash and investments at May 31, 2014, consisted of $71.8 million in North America, $20.5 million in Europe, $0.9 million in Latin America, and $42.8 million in Asia/Pacific.

We believe we will continue to have sufficient liquidity to fund our future growth strategies for our business in the foreseeable future.

Operating activities, which include our discontinued operations, used $9.8 million of cash during fiscal 2015. We had net loss of $5.6 million during fiscal 2015, which included non-cash stock-based compensation expense of $0.7 million associated with the issuance of stock option awards primarily to our directors and officers and depreciation and amortization expense of $1.7 million associated with our property and equipment as well as amortization of our intangible assets. Changes in our operating assets and liabilities, net of effects of acquired businesses and foreign exchange, was a $5.0 million use of cash during fiscal 2015. This increase is primarily due to increases in our accounts receivable of $4.5 million and inventory purchases of $7.5 million, partially offset by a decrease in our income tax receivable of $2.0 million and an increase in our accounts payable of $4.2 million. The increase in inventory and accounts payable relates to additional purchases to support our engineered solutions and healthcare growth initiatives. The increase in accounts receivable relate to slower collections during our focus on the implementation of our global IT platform.

Operating activities, which include our discontinued operations, provided $4.6 million of cash during fiscal 2014. We had net loss of $0.5 million during fiscal 2014, which included non-cash stock-based compensation expense of $0.8 million associated with the issuance of stock option awards primarily to our directors and officers and depreciation and amortization expense of $1.1 million associated with our property and equipment as well as amortization of our intangible assets. We also had a non-cash goodwill impairment charge of $1.7 million during fiscal year 2014. Changes in our operating assets and liabilities, net of effects of acquired businesses, provided $2.6 million of cash during fiscal 2014, due primarily to the decrease in our income tax receivable of $3.5 million, decrease in inventory of $1.5 million, partially offset by a decrease to our accounts payable of $2.1 million. The decrease in our inventory was the result of reduced inventory purchases during fiscal 2014 due to the decline in net sales.

Cash Flows from Investing Activities

The cash flow from investing activities has consisted primarily of purchases and maturities of investments and capital expenditures.

Cash used by investing activities during fiscal 2015 was $6.9 million. This included proceeds from the maturities of investments of $33.6 million, offset by the purchase of investments of $35.6 million, and $4.7 million in capital expenditures, primarily related to a new ERP system implementation.

Cash provided by investing activities during fiscal 2014 was $7.6 million. This included proceeds from the maturities of investments of $342.3 million, offset by the purchase of investments of $331.0 million, $1.0 million for the acquisition of WVS, and $2.8 million in capital expenditures, primarily related to a new ERP system implementation.

Our purchases and proceeds from investments consist of time deposits and CDs. Purchasing of future investments may vary from period to period due to interest and foreign currency exchange rates.

Cash Flows from Financing Activities

The cash flow from financing activities primarily consists of repurchases of common stock and cash dividends paid.

Cash used in financing activities during fiscal 2015 was $6.9 million. This included $3.9 million of cash used to repurchase common stock and $3.3 million in dividends paid, offset by $0.3 million of proceeds from the issuance of common stock from stock option exercises. The repurchase of common stock relates to our share repurchase authorizations. Cash dividends paid of $3.3 million were approved by the Board of Directors.

Cash used in financing activities was $11.9 million during fiscal 2014. This included $8.7 million related to the repurchases of common stock and $3.3 million in cash dividends paid, offset by $0.2 million in proceeds from the issuance of common stock from stock option exercises. The repurchase of common stock relates to our share repurchase authorizations. Cash dividends paid of $3.3 million were approved by the Board of Directors.

Dividend payments during fiscal 2015 were approximately $3.3 million. All future payments of dividends are at the discretion of the Board of Directors. Dividend payments will depend on earnings, capital requirements, operating conditions, and such other factors that the Board may deem relevant.

We believe that the existing sources of liquidity, including current cash, will provide sufficient resources to meet known capital requirements and working capital needs for the fiscal year ending May 28, 2016.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management continuously evaluates its critical accounting policies and estimates, including the allowance for doubtful accounts, revenue recognition, inventory obsolescence, goodwill and other intangible assets, loss contingencies, and income taxes. Management bases the estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, however, actual results could differ from those estimates.

The policies discussed below are considered by management to be critical to understanding our financial position and the results of operations. Their application involves significant judgments and estimates in preparation of our consolidated financial statements. For all of these policies, management cautions that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts includes estimated losses that result from uncollectible receivables. The estimates are influenced by the following: continuing credit evaluation of customers’ financial conditions; aging of receivables, individually and in the aggregate; a large number of customers which are widely dispersed across geographic areas; collectability and delinquency history by geographic area; and the fact that no single customer accounts for more than 10% of net sales. Significant changes in one or more of these considerations may require adjustments affecting net income and net carrying value of accounts receivable. The allowance for doubtful accounts was approximately $0.3 million as of May 30, 2015, and $0.6 million as of May 31, 2014.

Revenue Recognition

Our product sales are recognized as revenue upon shipment, when title passes to the customer, when delivery has occurred or services have been rendered, and when collectability is reasonably assured. We also record estimated discounts and returns based on our historical experience. Our products are often manufactured to meet the specific design needs of our customers’ applications. Our engineers work closely with customers to ensure that our products will meet their needs. Our customers are under no obligation to compensate us for designing the products we sell.

Inventories

Our worldwide inventories are stated at the lower of cost or market, generally using a weighted-average cost method. Our inventories included approximately $33.7 million of finished goods and $5.1 million of raw materials and work-in-progress as of May 30, 2015, as compared to approximately $30.9 million of finished goods and $3.0 million of raw materials and work-in-progress as of May 31, 2014.

Provisions for obsolete or slow moving inventories are recorded based upon regular analysis of stock rotation privileges, obsolescence, the exiting of certain market segments, and assumptions about future demand and market conditions. If future demand, changes in the industry, or market conditions differ from management’s estimates, additional provisions may be necessary.

We recorded provisions to our inventory reserves of $0.2 million, $0.8 million, and $0.4 million during fiscal 2015, 2014, and 2013, respectively, which were included in cost of sales. The provisions were primarily for obsolete and slow moving parts. The parts were written down to estimated realizable value.

We test goodwill for impairment annually and whenever events or circumstances indicate an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit.

During the fourth quarter of each fiscal year, our goodwill balances are reviewed for impairment through the application of a fair-value based test, using the third quarter as the measurement date. In performing our annual review of goodwill balances for impairment, we estimate the fair value of each of our reporting units based on projected future operating results, market approach, and discounted cash flows. Projected future operating results and cash flows used for valuation purposes may reflect considerable improvements relative to historical periods with respect to, among other things, revenue growth and operating margins. Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, historically, projected operating results and cash flows have not always been achieved. In accordance with ASC 350 “Intangibles - Goodwill and Other”, if indicators of impairment are deemed to be present, we would perform an interim impairment test and any resulting impairment loss would be charged to expense in the period identified.

Our goodwill impairment testing follows the two-step process as defined in ASC 350. The first step in the process compares the fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss to be recognized. In the second step, the fair value of the reporting unit resulting from the first step of the evaluation is allocated to the fair value of all of the assets and liabilities of the reporting unit in order to determine an implied goodwill value. This allocation is similar to the purchase price allocation performed in purchase accounting. If the carrying amount of the goodwill reported exceeds the implied goodwill value, an impairment loss should be recognized in an amount equal to that excess.

Intangible assets are initially recorded at their fair market values determined on quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized on a straight-line basis over their useful lives. Our intangible assets represent the fair value for trade name, customer relationships, and non-compete agreements acquired in connection with the acquisitions of Powerlink during our second quarter of fiscal 2012 and D and C acquired during our second quarter of fiscal 2013. Intangible assets fully relate to our EDG segment.

Long-Lived Assets

We review property and equipment, definite-lived intangible assets, and other long-lived assets for impairment whenever adverse events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.

Loss Contingencies

We accrue a liability for loss contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible losses can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. If we determine that there is at least a reasonable possibility that a loss may have been incurred, we will include a disclosure describing the contingency.

Income Taxes

We recognize deferred tax assets and liabilities based on the differences between financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and determine the need for a valuation allowance based on a number of factors, including both positive and negative evidence. These factors include historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences, and the implementation of tax planning strategies. In circumstances where we, or any of our affiliates, have incurred three years of cumulative losses which constitute significant negative evidence, positive evidence of equal or greater significance is needed to overcome the negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards. See Note 8 “Income Taxes” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

New Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers(Topic 606). ASU 2014-09 is principles based guidance that can be applied to all contracts with customers, enhancing comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of the guidance is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance details the steps entities should apply to achieve the core principle. For public entities, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period; early adoption is not permitted. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our financial condition, results of operations and disclosures.

We are exposed to many different market risks with the various industries we serve. The primary financial risk we are exposed to is foreign currency exchange, as certain operations, assets, and liabilities of ours are denominated in foreign currencies. We manage these risks through normal operating and financing activities.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchange rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations. Additional disclosure regarding various market risks are set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on this Form 10-K.

Foreign Currency Exposure

Even though we take into account current foreign currency exchange rates at the time an order is taken, our financial statements, denominated in a non-U.S. functional currency, are subject to foreign exchange rate fluctuations.

Our foreign denominated assets and liabilities are cash, accounts receivable, inventory, accounts payable and intercompany receivables and payables, as we conduct business in countries of the European Union, Asia/Pacific and, to a lesser extent, Canada and Latin America. We could manage foreign exchange exposures by using currency clauses in sales contracts, local debt to offset asset exposures, and forward contracts to hedge significant transactions. We have not entered into any forward contracts in fiscal 2015, fiscal 2014, or fiscal 2013.

Had the U.S. dollar changed unfavorably 10% against various foreign currencies, foreign denominated net sales would have been lower by an estimated $9.6 million during fiscal 2015, an estimated $13.8 million during fiscal 2014, and an estimated $14.1 million during fiscal 2013. Total assets would have declined by an estimated $23.1 million as of the fiscal year ended May 30, 2015, and an estimated $26.8 million as of the fiscal year ended May 31, 2014, while the total liabilities would have decreased by an estimated $0.9 million as of the fiscal year ended May 30, 2015, and an estimated $0.7 million as of the fiscal year ended May 31, 2014.

The interpretation and analysis of these disclosures should not be considered in isolation since such variances in exchanges rates would likely influence other economic factors. Such factors, which are not readily quantifiable, would likely also affect our operations.